Thursday, May 27, 2004

Interdependence

The hidden agenda behind the Alstom deal

Mario Monti's approval of the 2 billion euro cash injection into the ailing engineering giant Alstom is seen by some as a major set-back for European industrial policy, supporting unhealthy corporate giants instead of throwing the company to the wolves of the free market and letting nature take its course.

But that is to ignore the fact that the Commission has its own agenda, which is far more important than the health of the market, or the immediate fate of a single company. And it is clear that this agenda is the driving force behind the Alstom deal.

The clue lies in the price tag set by Monti for the deal: Alstom is required to seek partnership deals with other companies to secure its future and thus cease to become solely a French firm.

The obvious partner is, of course, the German engineering giant, Siemens, but Alstom's chief executive, Patrick Kron, has already signalled his reluctance to go down that route. However, he has a problem. As the Financial Times helpfully points out, there are not many potential partners around, and beggars can't be choosers. Kron may wriggle and squirm but, in the end, all Alstom’s roads lead to Germany.

If the outcome is a deal between Alstom and Siemens – and Monti will have the final say on approving any partnership arrangement – the Commission will have achieved something for which it was created to achieve. It will have broken up a huge national enterprise – in this case French – and created a Franco-German conglomerate. National companies will have ceased to be and a giant European company will be in the making.

This, after all, was what Monnet’s European Coal and Steel Community was all about - breaking up national enterprises and integrating them into European constructs under the control of a supranational government. At the time, the aim was to deprive any single nation of the capability to act independently – creating European-wide interdependence which was the precursor to political integration.

There is no question that this agenda survives to this day. An Alstom-Siemens link, therefore, would represent a major leap forward in European integration.

And, in a separate development, reported today is the news that GKN has decided to sell off its stake in the helicopter manufacturers, Augusta Westland, the focus of a huge political row in 1986 when the great Europhile Heseltine sought to detach the company from the US-owned Sikorski and bring it into a European helicopter manufacturing consortium.

With the Italian joint-venture company Finmeccanica buying up the GKN shares, Britain now loses any independent helicopter manufacturing capability. Since Westland's major customer is the Department of Defence, British forces are now entirely reliant on an Italian company for this vital equipment.

The exact outcome may not have been quite what Heseltine had in mind back in 1986, but the overall objective has now been secured – as in the case with Alstom – significantly greater European interdependence in a major industrial sector. Not for nothing did Monnet's biographer call him "The First Statesman of Interdependence". The "father of Europe" would be mightily pleased with this week's developments.

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